Key metrics: (11Nov 4pm HK -> 18Nov 4pm HK):
BTC/USD +13.0% ($81,200 -> $91,750) , ETH/USD -0.3% ($3,140 -> $3,130)
BTC/USD Dec (year-end) ATM vol +5.2v (51.8-> 57.0), Dec 25d RR vol +2.7v (3.2 -> 5.9)
Sharp acceleration over the last week with any initial indicators of over-boughtness giving way to very powerful momentum. Market appeared to own fair bit of gamma around the 90k region as the market initially resisted this level a few times before attempting to break higher, but that move struggled to break above $93.25k. $91.75–93.5k will be our top side resistance levels for now
First support lower comes in diagonal form as per the chart, which is just below current spot levels and that should keep the pressure on to test the highs. If spot cleanly takes out this support level we again find good support further below at around $85–86.25k, but below that we would expect to see a wave of more aggressive wash-outs in positioning
Daily and hourly ranges have begun to show signs of contracting and we expect realised volatility to come off if we don’t get a strong break through $93.5k. We remain long-term bullish with a reasonable target of $105–115k in Q1 but in the interim we would expect to see some consolidation over the next 6 weeks as the market takes a breather before its next leg higher. Should we see stronger evidence for contracting ranges (at least for the short term) in the coming week or two that would confirm this thesis and put pressure on gamma contracts
Market Themes:
‘Trump trades’ continued in full earnest this week with the USD pushing higher against FIAT currencies and US yields continuing to push higher. Crypto once again de-correlated from the USD with Bitcoin surging above $90k and Altcoins putting in some impressive rallies. US Equities took a breather at the end of the week after a good run that saw VIX collapse aggressively, though it was nothing more than a small correction in what remains a bull-trend
Focus has turned to Trump’s Cabinet picks, with the focus in the crypto world on the upcoming Treasury Secretary announcement. Scott Bessent originally appeared to be the frontrunner but Elon Musk threw his support behind Howard Lutnick over the weekend — both arguably pro-crypto picks though Lutnick even more so. However it seems this role is far from a done deal with Kevin Warsh and Marc Rowan both being added to the shortlist in the past 24 hours
After MSTR announced a purchase of >27,000 BTC in the week into and out of the election, it seems there has been continued demand with the share price still trading at all time highs and NAV at 2.5x premium to spot BTC. BTCUSD price action has been underpinned on every dip this week, and even with ETF outflows from ARKB and BITB on Thursday and Friday we still reclaimed $90k into the weekend
ATM implied vols:
Sharp correction higher in implied volatility levels across the board as spot broke aggressively through resistance at $80–82k last Monday night and didn’t look back. High frequency realised pushed up to the mid 60s last week as the market tested a high above $93k before chopping around the $87–93k range in a fairly volatile fashion
The term structure of the curve inverted quickly as the realised performance picked up and the spot move happened quicker than the market expected, with 29Nov ATM implied vol rallying from a low of 47–48 10 days ago to a high of 65. Further out the curve volatility levels were dragged higher in a weighted fashion
There is a structural argument for dampened volatility heading into the new regime — should Trump successfully get the ball rolling with regulation on institutional adoption in the US, this should unlock a fresh wave of capital inflows that will eventually underpin prices and dampen volatility. Moreover a lot of this is already being priced into BTCUSD spot levels, and despite the large spot moves witnessed the realised volatility hasn’t been above the mid 60s, while the market is pricing a consistent regime of high 50s/low 60s going forward for daily volatility (vs an average of 45–50 this year). For now, the bullish momentum is generating demand for strikes in the $100–150k range for year-end/Q1 ’25 and this is keeping implied volatility supported
Skew/Convexity:
Skew prices have rallied (further for BTC calls) this week as the market continues to look for an extension of the spot break, with $93–93.5k the key resistance level ahead in the short term. Implied volatility levels continue to show positive correlation with spot prices too, with offers coming in across the curve on the dips to $87–88k range, while offers pullback aggressively every time spot tests up towards the $91.5–93.5k range. There have also been unwinds of ITM call-spreads for year-end and roll-ups of ITM call strikes that has continued to put upward pressure on skew prices
Convexity priced higher as realised vol-of-vol picked up aggressively this week, while demand for wing strikes particularly on the topside >$100k were observed. The market also seems to have been paid for some wing low-strikes for cash protection/margin protection in shorter dates as well
Good luck for the week ahead!
